August 29, 2013 10:26 pm

Campbell Soup: good food

New products and packaging are working, for now

Is soup still good food, as Campbell’s old slogan would have it? Yes. After a few years of declines, Campbell’s grew its US soup sales by 5 per cent in the fiscal year just ended. The company has been stirring the pot with new products and packaging. That has included getting beyond the can immortalised by Andy Warhol to soups in boxes and pouches aimed at young people.

The company mixes its US soup and sauces businesses that together accounted for 35 per cent of its $8bn in overall sales last year. It also sells baked goods, beverages and has an international business.Campbell’s has also been swallowing companies in both product and geographic areas that should offer higher growth.

Seizing upon healthy eating trends, Campbell’s last year bought Bolthouse Farms, which makes premium fresh juices and salad dressing and fresh packaged vegetables, such as bags of baby carrots. Then, there is organic baby food company Plum Organics as well as Kelsen, a Danish company that is a seller of cookies and baked snacks in China and Hong Kong.

Together, those acquisitions have annualised sales of about $1bn. The company has certainly made progress. The turnround in the soup business is great news. But it was an especially cold winter in the US and that may have helped some. What’s more, some of the new businesses it has bought operate in competitive areas where Campbell’s may have less of an edge.

So far this year, shares of Campbell’s have rallied about 25 per cent. That beats both the S&P 500 and the consumer staples index. At $43, the stock trades at about 16 times its forward earnings. That represents a premium to its average over the past three years. Given its successes, the expansion is fair. But further upside will require that the trends in US soup continue, and that the acquisitions simmer along.

Email the Lex team in confidence at lex@ft.com

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